Controlling food costs contributes significantly to running a profitable operation.

“Restaurant owners are often like social workers—everyone [else] gets paid first, then they pay themselves,” says David Scott Peters, founder of He is on a mission to bring profitability to the independent restaurateur, which, he asserts, should take a page from the restaurant chains in how they control food costs. 

To run a profitable operation, operators need to control food costs and a reliable budget. “The budget is a tool that allows us to become a proactive management team versus a reactive management team,” Peters says.

The most important number in the budget is prime costs, which are based on total cost of goods sold (food and liquor), plus labor costs (plus taxes and benefits). Operators then subtract that number from their gross sales (before discounts are taken out and not inlcuding sales tax), and their restaurant should ideally end up with prime costs totaling 55 percent. 

Prime costs depend on several factors, such as the cost of goods sold, the amount of waste, the cost of ingredients purchased, and consistent portions in dishes.

Recipe for Profit

One suggestion Peters has to control costs is to create recipe costs and itemized cards for every item on the menu. Cards should detail how much of each ingredient goes into a dish, and thus will provide a standard cost for creating that dish. Operators can insist that employees control ingredients and portions with the proper use of scales, ladles, pre-portioned bags, measuring containers, or any standard measurement tool.

Beyond controlling costs, recipe cards in the back of the house create consistent expectations in the front of the restaurant. “If guests can get the same products, the same profile, the same portion size, it builds business,” Peters says.

Charge More, Pay Less

Another idea for operators is to implement price elasticity; if there is a high demand for an item on the menu, then raise the price, Peters suggests. “When it’s good, it’s of value at any price,” Peters says. “It allows us to avoid raising every price on the menu and shocking guests.”

As operators charge more from the guest, they also have the power to pay less with vendors. Peters suggests operators bargain with vendors by attempting to spend less on the top five items they typically purchase. Many vendors are willing to work with an operator who has proven to be a good customer.

Peters says good questions to ask a vendor are “If I promise to buy this many tons of this product, can you give me a better price?” and “Do you have a similar product of the same quality that I can purchase for a cheaper price?” In vendor negotiations, it’s important that operators do not risk quality, Peters adds.

Kitchen Confidential

Inventory control is another component of cost controls, and Peters suggests creating a system key item report to track inventory and prevent theft. “If your staff knows you’re keeping track, it helps prevents theft,” Peters adds.

If the numbers don’t match, then the information should show up on the waste sheet. A waste sheet tracks surplus or unusable material in the kitchen, detailing what the reason was and the dollar value of product that was lost, Peters says.

Inventory is also important when food orders come in the back door. An employee should be on-hand for drop-off orders to ensure the invoice is accurate, that the shipment matches the weight ordered, and that the quality and condition are sufficient.

By Joann Whitcher

Finance, Industry News, Labor & Employees